Recently I chatted with Fredrik Gronkvist, and I thought he had very interesting advice for small.medium size importers. He was kind enough to respond to this Q&A.

Fredrik is a co-founder of Chinaimportal, a company that offers sourcing, audits and shipping for small businesses importing from China.

Q: In your experience, what are the most frequent mistakes small importers tend to make on the supply side?

I could write a book on this topic, but l’ll try to stick to the basics. To begin with, most small buyers aren’t aware of the risks involved in manufacturing. Some of them don’t even understand that they are not buying products “off shelf” but are paying for products that are yet to enter production. The “Make to Order” dynamic has a huge impact since manufacturing is a not an exact science.

Basically, every item coming out from a Chinese supplier is a customized item. Many small importers assumes that the suppliers have set standards for which materials and components they use for a certain product. While this is true in some cases, not providing a supplier with a clear product specification is a recipe for terrible misunderstandings and quality issues.

That being said, small businesses are often not aware that there’s a huge quality difference (both management and product wise) between different suppliers in China. They browse Alibaba, send out a few inquiries and then settle for the supplier that quotes the lowest price. This is often the beginning of a disaster. It’s way too early to select a supplier at this stage.

There’s also an almost complete lack of interest or understanding of product certification standards. Many American and European importers assume that the EU and US product certification compliance is the sole responsibility of the supplier in China. However, it’s the very opposite. What makes things worse is the fact that, in certain industries, less than 5% of the Chinese manufacturers are willing or able to comply with standards such as CE, RoHS, REACH, FCC and EMC.

Considering that many small buyers make a supplier selection way too early combined with the fact that very few Chinese suppliers are compliant with US or EU certification standards – the chance of selecting a qualified supplier is pretty slim.

Q: In your experience, what are the most frequent mistakes small importers tend to make on the marketing/selling side?

Trying to compete on price and not branding your products. To begin with, a small company can’t go heads up with global corporations such as Wall Mart, Media Markt and Best Buy. It doesn’t work. Secondly, not branding your products means that you are adding no value to your company. You’re basically reducing yourself to a low end trader. I think the latter mistake is made based on the assumption that a brand is useless unless it’s already famous and well established. This is completely wrong.

Besides, branding doesn’t require a customized product. Most Chinese suppliers can offer ODM products with a buyer’s logo and customized product packing. The additional cost is often negligible.

Q: Do you have strategies to offer small importers? And maybe a case study to share?

The first thing an importer should do is to break down the product into a product specification. This includes materials, dimensions and product certification standards among others. When that’s sorted out, it’s time to start sourcing suppliers. Don’t look at pricing until you’ve received a quotation that is in compliance with your product specification.

However, reaching the Minimum Order Quantity requirement is another problem faced by small importers. Filling up a whole store with products from Chinese suppliers requires the importer to purchase a huge volume, since the MOQ must be reached for each product and not the total quantity. This makes it very hard for a small company to create a wide assortment of products, something that is expected by the market.

A small buyer must focus on creating value through branding, ensure decent profit margins and create product variation using other means. The latter can be achieved by streamlining the use of materials and components, while making changes to the products in a way that doesn’t force the supplier to raise the MOQ.

There’s a company that managed to do this very well, the watch brand Daniel Wellington. While most small businesses importing watches attempt to create a wide product assortment by importing several different models, Daniel Wellington used the same watch case – but in different colors and in combination with wristbands in various materials and colors. This makes a lot of sense since each watch case model requires a mold, while a wristband does not.

About a year ago I had a client coming over to Shanghai. They where sourcing various products for their home products store and this time they wanted to buy bathroom rugs. The budget was roughly enough to reach the suppliers’ MOQ, but not much more. The problem is that you can’t have a store that sells one type of rug, in one color. Instead, we visited the supplier and tried to find out what kind of product modifications they could achieve without being forced to raise the MOQ.

It turned out that coloring and cutting was not a problem, so in the end our client got rugs in three different shapes and in four different colors. While they were all made in the same material, we created 12 different variations without raising the MOQ.

The essence of this is that small buyer sourcing is not a matter of negotiation or cutting corners. It’s all about strategy and making informed decisions when selecting suppliers. Since I promised not to turn this into a book, I think I’ll stop here.

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If you want reach Fredrik, you can send him an email at info (at) chinaimportal.com.